Abstract

Adaptation to climate change is increasingly urgent and a vital part of efforts to achieve the sustainable development goals. Achieving climate-resilient economies and societies will not only require increasing the billions of financial flows for adaptation, but also shifting broader, public and private, financial flows and investment away from potentially mal-adapted activities towards those that contribute to climate-resilient economies and societies. 

The goal of aligning finance with climate-resilient development is included in article 2.1c of the Paris Agreement, yet efforts to define and operationalise this concept are at an early stage. This framing paper summarises the current status of these efforts and outlines a way forward for defining, measuring and mobilising adaptation-aligned finance.

This paper aims to contribute to the process of defining, measuring and – ultimately – increasing the proportion of finance flows that are aligned with climate resilience. This paper is intended to contribute to discussions in this area and does not prejudge the outcome of negotiations on related topics under the UNFCCC framework. This paper focuses on alignment in OECD and emerging economies, noting the unique challenges faced for financing adaptation in least developed countries and Small Island developing states.

It proposes the following principles for climate resilience aligned finance:

• Physical risk management: the physical risks from climate change (such as drought or heatwaves) should be identified and managed based on forward-looking analysis and considering the intersection of hazard, exposure and vulnerability
• Do No Significant Harm: the management of risks should be done in a way that does not increase the risk faced by others (e.g. by increasing downstream flood risk or damaging biodiversity)
• Alignment with adaptation strategies and objectives: the investment should be consistent with relevant adaptation plans or strategies, such as NAPs